Record gas prices in Metro as region’s refineries hit by cold: analyst

Even after the region’s refineries recover from the deep freeze, expect higher oil prices to push prices at the pump to a new normal of $ 1.85 per liter.

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Metro Vancouver drivers balking at record gas prices of nearly $ 1.77 per liter have little to hope for, as a longtime analyst predicts that $ 1.85 per liter will soon be the new normal.

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Refineries in the region are struggling to cope with the freeze and it is the main cause of the recent spike in gas prices, said Dan McTeague, president of Canadians for Affordable Energy, who runs Gaswizard.ca.

“The weather started to change after December 23,” McTeague said.

Calgary-based Parkland Corp.’s Burnaby refinery, which supplies about a third of the gas to the Lower Mainland and the island, issued an advisory of “unusually cold temperatures” affecting its operations days after that date.

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If freezing temperatures affect a refinery’s ability to “break down molecules to make gasoline or diesel,” it must go through a mechanical safety device called flaring, and burn all the oil in its system before it can burn. stopping to protect the equipment, McTeague said.

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He added that operations were also slowed down by the cold at a refinery run by the Dallas-based HollyFrontier Corporation in Anacortes, Wash., Which typically has the capacity to refine 149,000 barrels of crude per day. . Two storage terminals in Oregon, managed by NuStar Energy and Kinder Morgan Inc., which ship throughout the region, also had logistical challenges due to the weather. Additionally, the Trans-Mountain pipeline from Alberta to Burnaby is yet to return to 100% service after damage from the November storm.

“So all of these things (are) happening at the same time,” McTeague said.

The impact of the reduction in supply has been clear when looking at the local gas price at the rack or at wholesale. On December 22, it was US $ 2.06 per gallon and increased steadily to US $ 2.65 per gallon on January 5. It’s now down to about US $ 2.55, but “it’s up 60 cents a gallon,” McTeague said.

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Rising global oil prices have also hit gasoline pump prices in Metro Vancouver, but he estimates that impact is only about five cents per liter.

Metro Vancouver’s previous retail price record was set last July when gasoline prices hit 173.9 cents per liter.

“What you saw here breaking all-time high price records on July 1 had everything to do with the simultaneous decline of several key players in the region. This set the prices down on a tear.

The cost of oil fell from US $ 71 to US $ 77.85 per barrel by the end of 2021, McTeague said. He calculated that about five cents of the increase in gas prices since the last week of December can be attributed to the rise in the price of oil.

Gasoline prices in Metro Vancouver at the end of December were around $ 1.56 per liter. This weekend, they briefly exceeded $ 1.76 per liter for an increase of about 20 cents. While global oil prices are about five of that 20 cents, the remaining 15 cents can be attributed to local supply constraints, McTeague said.

But in the longer term, even if local capacity returns to normal, McTeague and others expect global oil prices to climb to around US $ 100 per barrel in 2022.

This broad outlook, combined with taxes and a weaker Canadian dollar, means that at the pump, Metro Vancouver drivers will be paying $ 1.85 a liter within weeks or months.

“An 85 buck is going to be a number you’ll see a lot more often.”

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